How has the mortgage market changed in the last 3 months?
In April 2014 the FCA implemented a new set of rules within the mortgage market place known as the Mortgage Market Review (MMR). One of the principle aims of this is for banks to have much stricter control only lending money to those that can afford it. The issue? Every banks interpretation of this is different and no two mortgage clients are identical.
The industry has seen a significant fall in mortgage approvals since April. Is this due to less people being eligible for a mortgage or is it down to the length of time to process a mortgage to approval stage?
From a brokerage perspective it is not due to less people being eligible. We have noticed that it has taken much longer to progress mortgage applications through to an offer stage in comparison to pre MMR times. One key contributor to this is the new documentation requirements.
Those who are self-employed looking to purchase or remortgage a property, would be advised to request your HMRC confirmation of earnings (SA302’s) as soon as possible. They can take up to two weeks to obtain. ‘Self employed’ also includes any shareholder of a limited company with more than a 20% share in the business. If you don’t have these this will delay the process for yourself and any vendor of a property you are buying.
Due to the housing market moving upwardly the number of applications has naturally increased. As the volume of applications has risen, valuations are taking longer to complete.
What do you need to know?
It is important for those looking to purchase a house that you take into account the time it will take to receive an offer. We are seeing a lot of pressure, especially by estate agents, to get valuations done and the mortgage approved by the lender in order to fully secure a property with the vendor.
The most complicated aspect of the introduction of MMR is affordability. Most lenders had moved away from an income multiples systems already, however MMR has meant the introduction of yet more complex models assessing affordability.
In addition to this, no two lenders are using the same method of calculating affordability, so we are seeing a real variance in the amount people are able to borrow from lender to lender.
We recommend consulting someone who has experience and knowledge of the different requirements for each bank. It is too complex for individuals to calculate what they can afford, especially through comparison websites as they are not complex enough themselves to calculate if you can genuinely borrow money off their best buy listings.
By contacting a mortgage consultant to discuss your current circumstances, you will get an idea of what you could borrow and understand the budget for a new home.